Downton Abbey is a global phenomenon: broadcast in 220 countries, it is watched by an estimated 160 million people in China[1] alone. However, the show – which is set in the early 1900s and follows the ups and downs of the aristocratic Crawley family and the servants who work for them – is coming to an end. And as it does, I’m struck by the change viewers have witnessed in society, particularly the role of women.
Central to this is the changing role of one of the show’s chief protagonists: Lady Mary. The eldest child, she was initially unable to inherit her family’s estate because she was not male. She could not even make any substantive decisions about how the estate was run, however hard she tried. But as time has gone on, we have seen her gradually make more and more executive decisions about what is in essence a business.
What strikes me though is that as archaic as these practices seem to us today, the boards running modern companies still don't have many women involved.
Our latest research analysed the boards of listed companies in the UK, USA and India and found that, although 990 out of 1050 now have a woman on the board, only 127 of them have females on their executive boards. This means that almost 90% of firms in three of the biggest economies in the world do not have any female input at a senior operational leadership level.
Not so different from the world of Downton Abbey, is it?
But just as Lady Mary starts making decisions for the long-term sustainability of the estate, so our analysis shows that companies with diverse executive teams outperform those with male-only boards. On the US S&P 500, companies with a female executive outperform those without by 1.91%. The ‘opportunity cost’ of this lower return on assets is equal to US$567bn or 3.5% of GDP. On the UK FTSE 350, the outperformance is 0.85%, an opportunity cost of US$74bn. And on India’s CNX 200, firms with diverse boards outperform their male-only peers by 0.53% or US$14bn.
This is a total opportunity cost of US$655bn – about the same as the total EU-US trade in 2014[2]. Of course, it’s important to note here that the results show correlation, not causation. In other words, the role of women in these companies may not be the only factor at play. But it's certainly too big to ignore and our research covers only listed companies in three markets. Imagine if that outperformance was expanded to all companies across all countries.
Just as society in the 1920s had to adapt to the idea of women getting involved in the running of family estates, so companies today need to ensure that corporate culture allows and encourages women to be involved in managing businesses. The huge economic potential means investors and governments also have a role to play in putting pressure on companies to diversify their boards and facilitate female participation in decision making.
Downton Abbey may only have a few episodes left, but as I prepare to bid a fond farewell to the show I’m hoping that the closure of this chapter will mark the opening of a new one: a drive by companies, investors, governments and society as a whole to help women reach their full potential. As measures to boost growth go, there simply is no downside to this one. We would be mad to ignore it.
[2] FX Street, 11 August 2015: http://www.fxstreet.com/analysis/fundamental-daily-market-analysis/2015/08/11/ (accessed 25 Sept 2015)
